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Bikky Khosla | 01 Sep, 2015
Is the China slowdown an opportunity for India? The Chinese crisis may be roiling global markets, but policy makers in India have had a uniform response: India is resilient to the crisis and China's loss is going to be India's gain. The RBI governor is of the opinion that China woes don't point to any urgent risk of a global crisis. Some top ministers and experts, going one step ahead, have viewed that the slowdown in China offers an opportunity to India to become a key driver of the global economy. Does this view hold any water? If so, is India's response to this opportunity adequate?

I strongly believe that we are today in a better shape compared to China. The Chinese economy is slowing, but India is gathering pace. Over the years, state-driven investments have created excess capacity in most of the industrial sectors in China, but in India the infrastructure sector alone can absorb trillions of dollars. During the 2007-14 period, China's debt has risen by a whopping 101 percent compared to India's 5 percent. In addition, our domestic consumption is higher than China and we have a rising working age population while China has not. In the background of this, it is clearly evident that the China crisis offers a big opportunity to India.

Our exports can also benefit from the crisis. It is true that slowdown in the Chinese market can have adverse effects on exports from some of our select sectors, such as steel, cement and auto parts, but our overall exports to China amount only to about $11 to $12 billion. Similarly, the Chinese slowdown may be potent enough to affect global growth, but again India's share of global trade is as little as 2 percent. So, it seems improbable that the struggling Chinese economy could have any binding constraint on our exports. In contrast, I think a large chunk of space in the global export market would be vacated by China, thereby creating a big opportunity for Indian exporters. It is also likely that lower commodity and crude prices will inflate our import bill.

But growth does not happen all by itself, neither exports do. China is shifting from an export-driven, investment-led economic model to one driven by domestic consumption and this transition holds massive significance to the world economy as well as India. Our policy makers need to look at the strategic implications of this shift and prepare long-term strategies accordingly. We have a lot to do in terms of infrastructure, manufacturing, export competitiveness and ease of doing business. Reforms must take place fast and at the ground level. We need to shape policies looking at a much longer time-frame. Otherwise, we will miss the opportunity to take the baton of global growth from China.